The Rundown on Fringe Benefits Tax

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FBT? Say what?

FBT is a tax paid on benefits provided to employees or an
associated party. If you are a director and run your business through a company
or trust, you may be regarded as an employee for FBT purposes.

And Fringe Benefits?

Fringe benefits are the provision of ‘Non-cash benefits’. Common
examples include:

- Allowing an employee to use a work car or other
vehicle for private use

- Providing an employee with an interest free, or
cheap interest rate loan

- Paying for expenses of a personal nature of
behalf of your staff

- Paying for staff Christmas parties and other staff
social functions

- Providing meals, dinners or gifts to employees

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Looking at Car Fringe
Benefits in more detail…

When calculating a car fringe benefit we have two options –
The statutory formula method and the operating cost method. There is
flexibility to choose whichever method yields the lowest taxable value, however
to use the operating cost method, a log book is required.

In many situations we see clients that would benefit from
using the operating cost method but fail to qualify because they didn’t have a
log book – so it’s worth putting one together!

Each logbook you keep must represent at least 12 weeks of
continuous travel, with this then being valid for five years – easy!

There are a couple of circumstances where the private use of
a car may be exempt from FBT, such as:

- Where the vehicle is designed to carry one tonne
or more

-
If the vehicle is a taxi, panel van or a utility
designed to carry less than one tonne

-
Any other vehicle designed to carry a load of
less than one tonne, where the private use is limited to:

o
Travel between home and work

o
Incidental travel when carrying out work-related
duties

o
Private use that is minor, infrequent and
irregular.

A few points worth
noting

·
Entertainment fringe benefits arise by way of
providing food, drink or recreation to employees. This includes gifts and
social functions.

FBT is exempt to the extent that the
benefits are a ‘minor benefit’ – that is less than $300.00 per employee per FBT
year. So celebrate awesome business wins with some champagne, or show some
appreciation to the team with a Christmas party, just don’t go crazy!

This exemption is limited to the extent
that the items are primarily for business use.

Currently, the ATO only allows for one item
per FBT year for items that have a substantially identical function, unless
you’re a small business – which can provide multiple items with similar
functions! Score!